Earnings drive convertibles action; Medidata tanks outright, adds on hedge; Rambus in line

By Rebecca Melvin

New York, April 22 - Earnings news drove much of the activity in convertibles on Tuesday, market players said.

Medidata Solutions Inc.'s 1% convertibles fell on an outright basis but expanded on a dollar-neutral basis after the New York-based clinical development software specialist reported disappointing earnings.

Rambus Inc.'s convertibles traded in line after the Los Altos, Calif.-based technology licensing company reported strong first-quarter earnings that beat estimates but trimmed its outlook for the current quarter.

ProLogis also reported first-quarter earnings that beat estimates by a penny, but the distribution and storage real estate investment trust narrowed guidance for full-year 2014.

ProLogis shares ended down 16 cents, or 0.4%, at $41.23. The ProLogis 3.25% convertibles due 2015, which mature in 11 months and have been somewhat overvalued, weren't seen to have traded but were last around 113.

The sprinkling of earnings reports in the next day also includes first-quarter results from Gilead Sciences Inc., Cubist Pharmaceuticals Inc., Illumina Inc., Covanta Holding Corp., Ramco-Gershenson Properties Trust and a fiscal second-quarter earnings report from International Game Technology.

Equities edged up again, with the S&P 500 stock index notching its sixth consecutive gain.

The S&P 500 added 7.66 points, or 0.4%, to 1,879.55, the Nasdaq stock market gained 39.91 points, or 1%, to 4,161.46, and the Dow Jones industrial average pushed up by 65.12 points, or 0.4%, to 16,514.37.

Medidata better on hedge

Medidata's 1% convertibles due 2018 traded down to 107 bid, 108 offered with the underlying shares down to $40.75 on Tuesday.

Medidata shares skidded $11.98, or 22.7%, to $40.71 on the day.

The convertible bonds had been closer to 120 with the stock at $52.69 at the close on Monday.

Therefore, the convertibles were seen up by about a point or two on a hedged basis, a New York-based trader said.

Medidata priced the $287.5 million deal of 1% five-year bonds last summer.

Early Tuesday, Medidata reported disappointing earnings that missed estimates. The cloud-based clinical development services company for life sciences organizations reported adjusted earnings at $0.11 per share on revenue of $76.6 million, which missed consensus estimates for profit of $0.16 per share and revenue of $79.5 million.

The company's share price has slipped in the last month amid concerns about slower growth, but the company was optimistic in its earnings release: "Interest in Medidata's platform is at an all-time high as our clients and prospects look to transform clinical development," chairman and chief executive officer Tarek Sherif said.

"We are seeing great sales momentum, as our pipeline continues to build, giving us confidence that 2014 will be another outstanding year," Sherif continued.

Rambus earnings rock stock

Rambus' 1.125% convertibles due 2018 were seen last at 122.375 bid, 123.375 offered, which was in line from Monday, a New York-based trader said.

Earlier in the session the bonds were quoted at 124.375 bid, 125.375 offered with the underlying shares at $12.70.

Rambus shares ended higher by 8 cents, or 0.7%, at $12.38. But initially shares fell by 10% in the early going after the designer of chip interface technologies and architectures reported late Monday first-quarter revenue of $78.3 million, which was 17% higher than a year earlier and ahead of estimates, but said it expects second-quarter results to be hurt by lower royalty revenue.

Mentioned in this article:

Medidata Solutions Inc. Nasdaq: MDSO

ProLogis NYSE: PLD

Rambus Inc. Nasdaq: RMBS

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